The sudden downfall of Silicon Valley Bank is the talk of the street these days and all over social media. In the aftermath of the financial crisis in the year 2007-2008, everyone thought that the fall of Lehman Brothers was the last bank to fall, at least in the twenty-first century. Regular support of its emergency reserves to withstand storms such as the current situation. This means that the global banking system is immune from collapse, and the same Lehman Brothers scenario a decade and a half ago will not happen.
The thing that the American legislators overlooked is that financial crises do not come in the same way and form in which they came previously, as they are like a virus that mutates from one form to another in order to be able to penetrate the financial system. The main problem of Silicon Valley Bank is that it put every egg in one basket, and this is different from the strategy pursued by banks in terms of diversifying the lending portfolio, in a clearer sense, the bank provided financing and loans to nearly half of the technology companies that have nothing but rented office space, and some yoga balls for employees to enjoy. In those companies and a bunch of promising ideas.
The psychological factor of investors on Wall Street played an important role in this fall of Silicon Valley Bank, by abandoning the shares of small banks such as “First Republic Bank”, which fell by more than 30%, and the free fall of Signature Bank by nearly 35% before the official announcement of the bank’s collapse. Silicon Valley a couple of days ago, thinking that customers might start withdrawing their money from smaller banks as well, bearing in mind the savings and loan crisis that lasted through most of the 1980s and early 1990s and that's what really happened with Silicon Valley Bank.
The fall of the banks is one of the three indicators of a strong positive indication of the stage of recession for any country. In the United States, these indicators are represented in the decline in the real estate market, which fell by 24%, and with the fall of the Silicon Valley Bank, the second condition has been fulfilled, and the unemployment rate has increased by 0.3% on its way to 0.5%, and the third condition has been fulfilled. The successive bankruptcies of US banks confirm the inevitability of economic stagnation and the bankruptcy of the US reputation.
Ali Muhammad Al-Hazmi